prop firm dilemma

[Don Bright]

Quote from marketsurfer:

i always wondered that if a prop firm trusted its system, its traders and its trader screening process--- why does it require a capital contribution from the trader ? can someone explain this to me ?

surfer

First off, there is NO "system" ever, will never be, cannot be, and please don't grow old looking for one. Any firm that says they have a "system" is full of it, period!

We provide the lower capitalized businessperson/trader with the ability to gain full access to the markets (without having to buy an exchange membership), we provide the capital to use to make sizable gains Free of Charge, we do our best to provide the best training possible, based on today's markets (from the best traders on the planet).

This is Your Business, not ours...we facilitate you in making it possible for you to have a very (very) low barrier to entry. The money you put up allows you to keep all your tradinig profits. How in the World do you expect to trade without any money? The "special deals" that we offer a select few traders, are usually backed by our personal money (we have a few groups here in Vegas).

I have spoken at great length about the "firms" who offer free entry, just to bury the average person with high fees and no chance to get ahead.

You certainly don't want something for nothing, and neither do we. This is a business relationship and both sides need to have their eyes wide open.

If there were a "system" then we would simply program our computers to trade for us.

(I hope I don't sound upset, I'm not at all...I can understand your question, but you need to take a look at it from another angle).

If you were a good trader (you may well be)...would you pay everything, take all the risk of your own money, just to make your pals rich? Of course not...

All this has to work for both sides....

See you in NYC!!



Don

 

[Soesman]

you can only have an educated guess as to how a trader will perform in real life situations. I've had lawyers do horribly and dishwashers become stars. By having a trader put up some risk captial, the prop firm limits and or eliminates the risk. They also give you enough buying power to make larger profits, money you would not ordinarily have access too if you traded for yourself. This system you mention is just a set of guidelines to limit risk and model what has been effective.

 

[Casey30]

Quote from 50 cent:

I was trading for one of the largest prop firms (not WorldCo). I had to put up $10K capital.

Every two weeks they would take traders who don't trade enough (i.e. don't churn their accounts) to a conversation, in which they would clearly state that "if you don't increase your volume it doesn't pay off for us to keep you". I and some other traders in the office have gone through this conversation on a bi-weekly basis.

More statements they threw at me and at other traders at our office (these are accurate quotes):

"A trader who trades less than 10 trades a day is a wanker."

"If you trade 50,000 shares a day we'll even pay you a salary."

"Just use the Time and Sales window to buy when there's a big bid and sell when there's a big ask, this way you'll make a lot of profitable trades."

I sure enough got a lot of those manager's angry looks that you guys mentioned.

I for one was not willing to accept their pressure to churn my account. I told the manager very firmly "I am trading with my money and therefore I will trade exactly how much as I like". Needless to say that increased the love between us.

The end of my personal story is, that after a few months at the office I took a month's vacation in Europe. One day I get an email from my dad, telling me that I got something called a "U-5" form in the mail. In other words, they simply fired me while I was on vacation. Once I heard about the U5 form I emailed my office's manager from europe and asked him what it was all about. He responded "we have decided to terminate your trading here, and we don't want you to work here anymore". Obviously I still have this email archived.

If you're sitting in a prop firm office you're asking for trouble. It's much better to trade remote, if for some reason you're hooked on going prop.

Anyway, to each his own.. but the least I can do is post my comments about these scums.

Good trading
50

I could understand how you feel about prop firms due to what happened to you. However, many successful traders find prop firms to be a useful way of going about business. If your going to trade 10k shares a day, there is really no point in trading prop(unless of course your just starting and learning). However, if you want to trade 100k-200k a day, the added capital that prop firms provide is essential. If I need extra buying power, I just make a call and I have it within a minute. If I needed it while trading from home, I would have to acquire the funds and wire it to IB and wait for them to post it to my account, meanwhile I may be missing some huge opportunties.

I actually don't blame your former firm for U-5ing you. Who takes a month long vacation only a couple months after starting to trade. I didn't take a vacation my first two years of trading. Trading is amazing, and I don't want to miss a single second of it. To me, someone who takes a vacation in the first year of trading may not be quite that serious about. However, it was unprofessional not to notify you before hand about it and that does suck.

 

[VOLUME]

50 cent
Senior Member

Registered: Oct 2002
Posts: 266


02-11-04 08:21 AM

The most amazing advantage trading gives you is FREEDOM. You need to answer to no-one but yourself.

Once you go prop, you lose that advantage. Suddenly you need to answer to everyone, just like when you had a day job, except you don't even get a salary!




That is absolutely not true. I have traded both prop and retail (back and forth many times), and NEVER did I have to answer to anyone. All daytrading, swing trades, days off, vacations, etc. were never questioned or commented upon.

Volume

 

[50 cent]

Quote from VOLUME:

That is absolutely not true. I have traded both prop and retail (back and forth many times), and NEVER did I have to answer to anyone. All daytrading, swing trades, days off, vacations, etc. were never questioned or commented upon.

Volume

LOL... and in the post just before you, someone wrote that I deserve to get fired for taking a vacation. In my previous posts you can read that the minute I took a vacation, I got fired (they seized the opportunity, so to speak).

I guess you were working at a better firm than I was.. you should recommend it to those interested in going prop. They're not all like that.

 

[50 cent]

Casey30,

Just for the record, I took that vacation after about 6 months. I wrote "a few months", not a couple of months.

Other than that, my main purpose for participating in this thread was to make the guy who started it aware of the dark side of prop, so to speak. Because I wasn't aware of it, and I paid for it. So it is my duty to share my exprience and at least make him AWARE. He'll make his own choices.

All the posts here who spoke in favor of the prop firms didn't even contradict what I was saying. And what I was saying is: you need to trade massive volume (i.e. generate commissions), or you can't sit in a prop office. Your profitability is irrelevant. You can be a net loser and still sit at the prop office, as long as you generate commissions.


You MUST generate a lot of commissions. Newbies READ: You must generate massive commissions if you want to keep your prop seat.

Anyone disagrees?

And once again, to each his own opinion..

Gone pimping
da 50 Cent

 

[Lights]

Quote from 50 cent:

Casey30,


You MUST generate a lot of commissions. Newbies READ: You must generate massive commissions if you want to keep your prop seat.


Anyone disagrees?

what is... "massive commissions"? as long as you cover cost of service and make money for firm by commission, there'd be no reason to ask you to leave. also, generating commissions does not always equate to churning. it is often a means to generating more profit.

if you cannot do the minimum shares/day they request.. you probably have no reason to be there. if you trade very small, maybe better off trading retail you can get 4/1 margin. i heard of guys at props asked to leave after they were trading 1600 shares/day making $20.

prop is not charity.. imo, the reason traders go prop is to obtain obscene buying power without tying up large amounts of personal money.

you and the prop firm both win if you make alot and trade alot. and this scenario makes sense for many successful traders. but it is not for everybody.

 

[murray t turtle]

Quote from marketsurfer:

i always wondered that if a prop firm trusted its system, its traders and its trader screening process--- why does it require a capital contribution from the trader ? can someone explain this to me ?

surfer

%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%


I 'll compare it to the banking business, which rightly doesnt treat everyone the same,
and policy varies
from company to company.

Banks are interested at least 3 ''c''s

c-capacity to pay

c-collateral
=======
Marketsurfer & Hunter;
If you like studying trader personalitys like i do

blairhull.com
has him catching a fish/trout as a kid

 

[CalTrader]

Quote from Lights:

what is... "massive commissions"? as long as you cover cost of service and make money for firm by commission, there'd be no reason to ask you to leave. also, generating commissions does not always equate to churning. it is often a means to generating more profit.

...

Problem is .... Trading is not a commission game. You can acheive very good results trading no where near the volume numbers you state, and you can also do very very well at or exceeeding the numbers you mention.

So the bottom line is that anyone that starts spouting transaction volume numbers is out of line and if you get yourself into a situation that depends upon a particularly large volume as part of the deal then you've been suckered ... IMHO.

 

[50 cent]

CalTrader is right. I now trade futures and rarely make more than 2 trades a day. I capture larger intraday moves. My win/loss ratio is ranging 40%-60%, and my risk/reward ratio is anywhere between 130%-250% (winners 1.3 to 2.5 bigger than losers on average). I am profitable, and getting better.

But oh, no, I produce so little in commissions! I really suck as a trader don't I? I should get fired! Besides, I trade futures.. what a criminal.. according to a recent chat session here on Elite, futures are a zero sum game and I am destined to lose eventually... what should I do? Can anyone help me?